FINRA Orders Robinhood to Pay Record Financial Penalties of Approximately $70 Million

The Financial Industry Regulatory Authority (FINRA) announced on June 30 that it has ordered Robinhood Financial LLC (Robinhood), a US leading trading platform, to pay approximately $70 million for systemic supervisory failures and significant harm suffered by millions of customers. The sanctions represent the largest financial penalty ever ordered by FINRA .

The total penalties consist of $57 million which FINRA has fined Robinhood and around $12.6 million in restitution, plus interest, to thousands of harmed customers.

According to its investigation, the US regulator found that Robinhood has negligently communicated false and misleading information to its customers since September 2016. Also, the firm displayed to some of its customers inaccurate negative cash balances. Due to its misstatements, thousands of other customers suffered more than $7 million in total losses.

Besides, FINRA found that since Robinhood began offering options trading to customers in December 2017, the firm has failed to exercise due diligence before approving customers to place options trades.

Additionally, from January 2018 to February 2021, Robinhood failed to reasonably supervise the technology that it relied upon to provide core broker-dealer services, such as accepting and executing customer orders.

Moreover, between January 2018 and December 2020, Robinhood failed to report to FINRA tens of thousands of written customer complaints that it was required to report.

In settling this matter, Robinhood neither admitted nor denied the charges, but consented to the entry of FINRA's findings.